Who is Ms. Money Savvy? I'm a thirty-something woman on the path to financial independence. I've done some things right and some things wrong along the way. Join me on my journey.

If you want to learn from my successes (and my FAILURES), subscribe now.

Any information shared on this site does not constitute financial advice. This site is intended to provide general information only. You are advised to discuss your specific requirements with a financial advisor.

Thursday, 21 Mar 2013

When it comes to raising children, teaching the money skills is one of the most valuable lessons that you can give them. Many children end up becoming financially illiterate when they become adults, and it can have a major impact on them overall. If you want your kids to understand the basics of money, here are some of the best ways that you can teach them what they need to know

1. Give Them an Allowance

If you want to help your kids understand how to handle money, you’re going to have to give them some money. Since they can’t really go out and get a job at the age of four or five, it’s up to you to help them out. You can make them do chores or help out in other ways around the house in order to earn the money that you give them. Many experts say that you should give them a dollar for each year old that they are each week. You could also cut that number in half or come up with another figure. By doing this, it allows them to accumulate more as they get older.

2. Teach Them to Budget

Once you have provided them with some money to work with, it is time to teach them how to budget. The first few times, let them blow the money on whatever they want. More often than not, they’ll simply take the money and spend it on candy or toys right away. Usually, kids will realize that they’re not going to be able to buy anything of value by doing this.

Teach them that they have to allocate their money to certain things in a budget fashion. This way, when they want to buy something big, they’ll have some money to do it. You may want to show them that there are ways to extend their budgets and save money; for example, you could show them how to get coupon codes for DogFunk.

Then once you have DogFunk coupons, you can show them how they save money when they buy something that they want. This helps them see that their budgets can be stretched a bit with careful planning.

3. Show Them Investing

In the grand scheme of things, there are only two ways that anyone can earn money. They can earn money by working or they can earn money by relying on their money to do it for them. If you want your kids to get ahead in life, it is important to show them that they can make money with their money. Many parents use a system in which they pay their kids interest when they save.

This teaches them that they can make money when they invest it. You may also want to teach them about investing in securities like stocks and bonds when they get a little bit older. You could even help them open a Roth IRA at some point. This way, they can invest and they still have the option of taking their deposits out in the future without any penalty.

4. Use Reality as a Teacher

Every parent has been in a situation where they really want to buy something for their kids when they can’t afford it themselves. While there’s nothing wrong with occasionally getting them a gift, reality can be one of the best teachers that you ever employ. Instead of just chipping in and automatically making up the difference, let your kid wait on that big thing he wants. It will show him that it takes time to accumulate money and it’s not just some limitless good.

These lessons have the potential to change your child’s life and get him off on the right foot.